Facebook and the recent spoils of the two sided markets: Marketing blunder

When the service is given freely to you, you are the product! 

The economics behind the free services offered by a host of internet start-ups two decades back, was actually studied by the Nobel Prize winning economist, Jean Tirole (Nobel Prize in 2014), in his treatise, “Two Sided Markets”, two years before Google went public, in 2002. Together with Rochet, Tirole proved that businesses must get both the sides of the market on board, like the newspaper buyers and the advertisers in the newspaper; if you raise the price of the newspaper, you would drive away the readers, which is the main source of the revenue that would come from more eye-balls through advertising, while giving the newspapers free would attract a lot of readers, but it could create a moral hazard for a number of constituencies; no wonder financial newspapers, or magazines with sexual content (few would advertise their products in such a magazine), etc, attract high prices, while rest go cheaply.

 But when services are freely given, you are the product. When Facebook has almost completed its enrollment of “products” in the developed world, its next growth spiral can only come from the untapped and unexplored developing world. India makes a perfect ground for Facebook as mobile penetration is disproportionately high compared to many other developing nations.

 The idea of offering free internet services to the poor sections is indeed a lofty goal but it has perfect business sense as the enthralled multitudes of poor hooking on with a service provider would be perfect ‘products’ for sale to the world of advertising and other services.

Well, if this comes as value to the poor, why should there be so much fuss!

On careful scrutiny, one would see the counter argument emerging as follows:

1. The product, in this case the poor, would have a very limited view of the internet; for all you know it would become their ‘false’ understanding of the internet, some say, it would be their Facebook.
2. Limiting internet services, where other competing services are on offer at par would definitely fall under the argument of net neutrality
3. The current internet services on offer by Facebook, free of charge, is wildly insufficient to generate any kind of poverty alleviation program for the poor, no matter how lofty the proclamations.

It is this systematic attempt to subvert the rationale for business or to selectively make allowance for something which otherwise in the world of net neutrality is completely unabated and uninhibited, is where the bone of contention lies.

Mr. Zuckerberg's advisers would have done far better if at least the first part, the rationale for business, would have been made abundantly clear; on the contrary some versions have gone to the extent of saying that this is his benevolent step towards making India free from poverty.

Well, the current milieu of Facebook users would better know who became richer!

Marketing, even with the wildest stretch of the imagination, sometimes fail, but it always wanes when a loud lie is proclaimed.

Simple truth would have won, with no fuss.